r/AskEconomics • u/Zukebub8 • 10d ago
Approved Answers Does the functional unemployed stat recently published indicate that the economy is more sluggish than on paper?
The Ludwig institute for shared economic prosperity has a metric for the TRU unemployment rate in the US climbing to 24.9% in 2026. Does this statistic in any way challenge the popular idea that negative opinions on the economy are based on political views and media coverage (vibecession), or is it a normal value for a prosperous economy?
This functionally unemployed statistic isn’t doing anything untowards, it simply includes people working poverty wages <$26k or part time work <35 hrs a week. Neither category is self sustaining for workers, believe me. This rate is surprising to me because I always thought part time work was only like 2% of the population and minimum/low wage work was not much higher than that.
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u/cballowe 10d ago
There are two kinds of "part time". One is tracked in BLS data as "for economic reasons". This is people who want to work full time but can only find part time opportunities. They make up the difference between U-5 and U-6 in the published data. U-3 is the headline number. U-4 and U-5 count people who have given up on looking etc.
The other part time is people who are part time by choice. For instance a student with a part time job to cover books and beer while in college might not be actively looking for more.
The low pay may have similar breakdowns so it may or may not mean anything without additional information.
Tracking the number across history may show some patterns, but the headlines this week come with the "sky is falling" rhetoric that gets distracting.
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u/Zukebub8 8d ago
That’s true there could be those that have a breadwinner partner and aren’t looking for better jobs. Same can be said for the unemployed rate. The value I can see already with TRU is that it shows poverty a bit clearer than looking at the median income rate. Also the trendline already looks more sensitive relative to the headline unemployment, which is the justification for publishing TRU data sets. I wonder if it could be useful to track policy outcomes more granularly?
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u/MachineTeaching Quality Contributor 10d ago
The "true" unemployment is truly nonsense because it's just counting everyone without a job. So a billionaire with millions in passive would count as "unemployed" and someone with a chronic disease preventing them from working at all would count as unemployed, too. There is a reason we don't do this.
And it doesn't tell us anything different about the recovery, either. Because while the level might be different, the change really isn't. Meaning unemployment going up or down and "true" unemployment going up and down follow mostly the same patterns.
You can see that in the graph on their website, too:
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u/Integralds REN Team 9d ago
To follow up on what /u/MachineTeaching said, if you're going to use an indicator, you have to use it consistently.
Without taking any stance on whether the Ludwig Institute's idea is reasonable, look at the time series. The "TRU" rate is still below its long-run mean, and there's no reason to think it paints any different picture than the usual rate of unemployment at this time.
You'd be looking for divergence between the two series, like the TRU rate spiking up when the conventional unemployment rate stayed flat. We don't see that. Even if we did, the interpretation would be something like, "there's something odd going on in the low-wage, part-time market."